Rail Tariff Authority to be set up through executive order

NEW DELHI: The government is exploring the possibility of expediting the formation of the Rail Tariff Authority (RTA) through the executive route after the proposed regulatory body received an in-principle nod from the Cabinet.


"RTA has got in-principle approval from the Cabinet. But since setting it up through an Act of Parliament will take some time, the Law Ministry and Railways will examine whether it will be set up through an executive order," Law Minister Kapil Sibal told reporters here today.

The Law Ministry and Railways will work out details for the formation of RTA, the first-of-its-kind body for the national transporter, to periodically suggest tariff levels for both freight and passenger fares taking into account input costs (diesel, electricity) and volatile market conditions.

RTA will be a five-member body headed by a chairman. "We need to take it forward through executive action," Sibal added.

The Authority, mooted by former Railway Minister and Trinamool Congress MP Dinesh Trivedi in his Rail Budget for 2012-13, was pursued by his successors CP Joshi, Pawan Kumar Bansal and present incumbent, Mallikarjun Kharge.

The need for setting up the RTA, which is intended to be immune from political interference, has been felt due to a rise in the cost of running trains and the need to insulate the Railways from hikes in fuel and electricity prices. One of its objectives would also be to eliminate uncertainties in tariff formulation.

The cross subsidisation for passenger services had gone up to Rs 36,000cr in 2012, which was reduced to Rs 32,000cr after the latest hike in passenger fares and cancellation charges.

In 1950, Railways was earning 47 per cent of its revenue from passengers, which is down to 27 per cent now. Freight earnings account for 67 per cent of revenues at present.

Railways had sent the plan for the RTA to different ministries, including Finance, seeking their views on the proposed body before submitting it to the Cabinet for its nod.

The Prime Miniter's Office, too, was constantly pushing the proposal for the setting up of RTA.

Currently, Railways has fuel adjustment component (FAC) policy which is linked to energy and fuel prices and calculated accordingly. The FAC for both freight and passenger fares is slated to be reviewed every six months.

While freight rates have gone up by about 5.7 per cent from April 1 due to the linking of FAC in the tariff, Railways will in October examine its applicability for passenger services.

In fiscal 2013-14, the deregulation of diesel prices for bulk users, such as Railways, will add Rs 5,100 crore to the public transporter's costs. The Railways will absorb the Rs 850 crore rise in passenger costs on this account.